Excessive Pricing of Off-Patent Pharmaceuticals: Hatch It or Ratchet?

October
2017
Jennifer L. Graber

There is growing concern over the pharmaceutical industry’s ability to set and raise drug prices as it sees fit. The price of a drug that has not been protected by a patent for decades can suddenly increase—or “ratchet”—as much as 10,000%. This Note identifies the problem of ratcheting drug prices and considers whether these abrupt changes in drug prices derive from a longstanding problem inherent in the United States’ pharmaceutical regulatory regime. It then considers the most commonly suggested mechanism for countering high drug prices—stimulating competition in the pharmaceutical market—but ultimately concludes that focusing solely on increasing competition constructs an overly simplistic view of ratcheting drug prices. In order to find an effective solution to unexpected increases in drug prices, this Note evaluates a small subset of pharmaceuticals that have recently undergone a sudden price increase and separates the ratcheting events into two categories: (1) those that occur as a result of natural deviations in the market, and (2) those that occur due to business tactics that take advantage of vulnerabilities in the drug market. It concludes that under this categorization, antitrust law may provide an effective solution specifically directed at ratcheting events of the second category— those driven by anticompetitive behavior.

This article appears in the October 2017 Issue: Volume 92, Number 4